UK Pledges To Boost Innovation But Skills Gaps May Spoil The Party

Last week, UK prime Minister Theresa May provided businesses with clarity of a sort when she ruled out continued 'membership' of the single market as part of any post-Brexit settlement with the European Union. For many businesses – and particularly those who trade regularly with customers or suppliers on the European mainland – this was unwelcome medicine. Unless Britain's negotiators succeed in agreeing a strong and mutually beneficial trade deal with the 27 remaining members of the EU, the days of seamless, tariff free trade could be coming to an end.

In the short term at least, exit from the single market is likely to exacerbate the skills shortages that continue to dog the United Kingdom, not least in the tech sector.

Take a walk around London's much-vaunted Tech City area and it quickly becomes apparent that much of the human capital underpinning Britain's technology boom is drawn from overseas. And unsurprisingly many of the coders and entrepreneurs who inhabit the office blocks of the tech district are European in origin. Post-Brexit, we can only assume that it won't be so easy for employers to take on European staff and nor will Entrepreneurs from Spain, Estonia or Poland find it so straightforward to relocate to London.

Today, however, the government launched a consultation on an Industrial Plan that is intended to ensure that Britain not only survives but thrives as it leaves the EU and seeks to establish itself as a "globally-focused" trading nation.

Good News For Tech Sector

And there was some good news for the tech sector, particularly in terms of a renewed commitment to invest in science and innovation across sectors such as artificial intelligence, robotics and green energy. These are all areas of the market where small technology companies are making much of the running.

More Pressure On Skills

But here's the conundrum. Increased investment in technology-driven businesses will create more demand for skills that are already in short supply. Brexit, however, may put a brake on the ability of businesses to recruit the staff they need internationally.

So today's consultation document on Britain's industrial policy proposes a number of remedies aimed at creating a deeper pool of home grown coders, engineers and scientists.

Rethinking Education

At the heart of the proposals is a plan to rethink the education system. In practice that will mean more routes into technical education through new colleges. Meanwhile, in the "academic" stream that traditionally channels students to higher education, there will be more emphasis on science, technology, engineering and maths subjects. As things stand, there are huge imbalances. For instance, STEM subjects are significantly more popular in the South of England and London than in the North. Sadly its also the case that fewer girls study STEM subjects than boys. To redress this imbalance, the government proposes better career guidance and more specialist schools with a STEM focus.

A Brake on Growth

So will this help solve the skills shortage? Probably not in the here and now.

Let's take the much-vaunted fintech sector as an example. According to Phil Bindley, chief technology officer at data centre company , the Bunker, current skills shortages are already threatening to slow the pace of growth.

Located in former military installations, the Bunker specialises in providing an ultra secure data centre environment and that element of its offering has attracted a disproportionate number clients from the financial sector. “Around 60% of our revenues work in fintech,” says Bindley.

Phil Bindley says skills shortages threaten fintech growth

And as he sees it, the sector has the potential for continued rapid growth. “I would predict a certain amount of consolidation in mature segments of the fintech market such as payments,” he says. "But there is huge potential for growth in areas such as governance, compliance and insurance tech. P2P finance and crowdfunding are also vibrant.”

But fintech pioneers are competing for STEM-educated staff in an era when businesses from other areas are fishing in the same pool. And for startups, there is the added problem of recruiting in competition with large, well established companies who can often offer much more in terms of salary and benefits packages.

So what is the answer? As a company providing outsourced services, Bindley is quick to point up the benefits of handing over non-core IT functions and development to specialist third parties. “That approach allows fin tech companies to keep their developers focused on building the product rather than also managing a secure infrastructure,” he says.

But there other strategies. For instance, rather than always competing for graduates, the bunker has addressed some of its own skills gaps by taking on apprentices. “We take on 18 year olds and grow them within the business,” he says.

In it For The Long Term

But arguably the UK's emergence as a centre of innovation and tech entrepreneurship will ultimately depend on the success of measures to increase the flow of suitably skilled people coming out of schools, colleges and universities. And there is a mountain to climb in terms of matching the skills of school leavers and graduates with the ongoing requirements of high tech companies. The government's proposals represent a long-term fix.

In the short and medium term this takes us back to the Brexit question. How will the post-EU UK continue to attract skilled overseas workers and what mechanisms will the government put in place to make hiring as easy as possible. These questions should be answered quickly and with clarity.